Wendy's outsourcing IT, expects up to $15M restructuring costs

Dive Brief:

Burger and Frosty chain Wendy's is outsourcing IT, resulting in costs of up to $15 million on IT restructuring, according to an 8-K form filed with the U.S. Securities and Exchange Commission (SEC) Tuesday.
The restaurant is using a third-party consulting firm to "realign" its IT organization, primarily at Wendy's restaurant support center in Dublin, Ohio. Wendy's expects severance and related employee costs to be between $8 million and $9 million and third-party costs between $5 million and $6 million.
The costs will be recognized during Q4 2019 and bleed into Q1 2020. Wendy's expects about $12 million of the total cash expenditures occurring in the New Year. In response to the expected costs, the company updated its free cash flow outlook, anticipating between $210 million and $220 million in 2020.

Dive Insight:

Wendy's relies on an internal technology council tasked with bringing "technology to life in restaurants." The council, similar to its franchise advisory council, checks in on restaurants to make them comfortable with operational changes.

Last year the company had a C-suite shake up, with then-COO Bob Wright overseeing customer-facing and in-store tech after its CIO retired. Wright, who left Wendy's in May, was filling the gap left by former CIO David Trimm's retirement.

The C-suite shuffle occurred as Wendy's emphasized its digital footprint, which was already supported by a third-party consulting firm.

Restaurants are meeting customers where they are, like other industries disrupted by technology. "As we continue to provide more access to the brand through expanded delivery partners and launching a loyalty program," Wendy's is investing in more digital solutions, according to Todd Penegor, CEO, during the company's Q3 2019 earnings call.

Digital, alongside a new breakfast menu and international scaling, is a primary growth accelerator, according to Penegor. Breakfast is a feat Wendy's has tried and failed, but the company remains optimistic, in part, because of technology.

The restaurant expects digital sales to make up 10% of total U.S. sales by 2024, compared to the 2% sale contribution of today. Digital sales include made for delivery, mobile ordering and at kiosks.